Licking wounds, insurers accelerate moves to limit health-law enrollment

Screenshot via Healthcare.gov.

Stung by losses under the federal health law, major insurers are seeking to sharply limit how policies are sold to individuals in ways that consumer advocates say seem to illegally discriminate against the sickest and could hold down future enrollment.

In recent days Anthem, Aetna and Cigna, all among the top five health insurers, told brokers they will stop paying them sales commissions to sign up most customers who qualify for new coverage outside the normal enrollment period, according to the companies and broker documents.

The health law allows people who lose other coverage, families with new children and others in certain circumstances to buy insurance after enrollment season ends. In most states the deadline for 2016 coverage was Jan. 31.

Last year, these "special enrollment" clients were much more expensive than expected because lax enforcement allowed many who didn't qualify to sign up, insurers said. Nearly a million special-enrollment customers selected plans in the first half of 2015, half of them after losing previous coverage.

In addition, Cigna and Humana, another big health insurer, have ceased paying brokers to sell many higher-benefit "gold" marketplace plans for individuals and families while continuing to pay commissions on more-profitable, lower-benefit "bronze" plans, according to documents and interviews.

Gold plans typically enroll sicker members than do less comprehensive policies, say insurance experts. As of June, more than 695,000 people had enrolled in gold plans.

Those who want to buy individual and family plans can still do so directly through the Affordable Care Act's online marketplaces or via navigators working for nonprofit groups.

But the retreat from broker sales, which includes last year's decision by No. 1 carrier UnitedHealthcare to suspend almost any commissions for such business, erodes a pillar of the health law: that insurers must sell to all customers no matter how sick, consumer advocates say.

By inducing brokers to avoid high-cost members -- whether in gold plans or special enrollment -- the moves limit access to coverage and discriminate against those with greater medical needs, said Timothy Jost, a law professor at Washington and Lee University and an authority on the health law.

"The only explanation I can see for them doing this is risk avoidance -- and that is discriminatory marketing and not permitted," he said. "When people wonder why we're not getting millions more enrollees in Affordable Care Act health plans, one reason is, the carriers are discouraging it."

The insurance industry says it is not discriminating but adjusting to market realities including higher-than-expected medical claims and the failure of a government risk-adjustment program called "risk corridors" to cover much of that cost.

"Without making necessary changes to coverage and benefits, there was no way for health plans to remain in the market or to offer the kind of coverage as they had in the past without sustaining huge losses," said Clare Krusing, spokeswoman for America's Health Insurance Plans, an industry lobby.

The adjustments are critical to keeping coverage affordable and sustainable, said individual insurers contacted by a reporter.

If insurers are telling brokers they won't be paid for enrolling people in gold plans, "that to me is pretty discriminatory," said Sabrina Corlette, research professor at Georgetown University's Center on Health Insurance Reforms.

The changes don't affect job-based insurance or the government's Medicaid and Medicare programs.

The nonpartisan Congressional Budget Office estimated as recently as last March that 21 million consumers would be enrolled by now in private health insurance plans sold through online marketplaces. Now CBO forecasts 13 million will sign up this year.

Brokers are critical to sign-ups and the success of the health law. For 2014, 44 percent of Kentucky enrollees bought through brokers. So did 39 percent of the California enrollees. No similar figures are available for the marketplace that serves most states, healthcare.gov.

Brokers are a "very important" part of enrollment for individuals and families despite alternatives provided by the health law, said Robert Laszewski, an insurance consultant. "They're still big."

With varying commissions, brokers will be tempted to promote only plans they make money on, even if those aren't the best for some customers, said John Jaggi, an Illinois broker and consultant.

"Now they're really forcing the agent to think only of the plan that he gets compensated for," he said.

The race to lower commissions began last year with United's move along with decisions by several, smaller insurance co-ops to suspend sales fees shortly before they failed, brokers said. Other insurers feared they might end up getting their competitors' unprofitable business, so they too adjusted fees.

Last week, BlueCross BlueShield of North Carolina also told brokers it would stop paying commissions for special enrollment starting April 1, reported The News and Observer of Raleigh.

"We expect that at some point in time all of these companies will continue to reduce commissions where we're not able to be compensated in a way that we can continue to run our businesses," said Kelly Fristoe, who sells health insurance in Wichita Falls, Texas.

Regulators in at least two states, Kentucky and Colorado, have already warned insurers that altering broker commissions violates "fair marketing" rules or the terms approved rate filings.

Federal regulations prohibit insurers from marketing practices that "have the effect of discouraging the enrollment of individuals with significant health needs." Violations can bring penalties of up to $100 a day for each adversely affected person.

The Department of Health and Human Services did not respond to requests for comment on the practices.

Insurers "can't market their plans in ways that discriminate," said Sarah Lueck, a policy analyst at the Center on Budget and Policy Priorities, a left-leaning think tank. "It's going to take some more statements from regulators to make sure insurers get the message."

What's unclear is whether insurers intend to resume paying full commissions when open enrollment begins for 2017.

In its Monday letter to brokers, Anthem said it "remains committed" to individual and family insurance. United, however, said last year it might leave that business altogether -- a drastic move because under federal law it couldn't reenter for five years.

Few if any carriers want to go that far, said Laszewski.

"They can't withdraw from the market," he said. But by adjusting commissions, "they're doing everything they can to slow it down until it gets fixed."

Special-enrollment business is typically costlier than average because sick people are more motivated to sign up outside the normal marketing season, insurance experts say.

But last year's special enrollments were especially unprofitable because regulators did little to ensure that consumers followed the rules -- that they had lost previous coverage, gotten married, moved or otherwise qualified for off-season sign-ups, insurers say. As a result, any consumer could wait until he or she needed care to enroll, they say.

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Aetna told HHS that a fourth of all its marketplace members joined through special enrollment last year and that many dropped out soon after receiving expensive care. Special-enrollment members used as much as 50 percent more care than those who sign up before the deadline, said the Blue Cross and Blue Shield Association.

Of the top seven health insurers, only Kaiser Permanente and Health Care Service Corp., which owns Blues plans in Illinois, Texas and elsewhere, haven't changed commissions recently for gold plans or special enrollment, brokers say.

"Kaiser Permanente won't be making any broker commission changes," said spokeswoman Amy Packard Ferro. "It's business as normal but we are always evaluating our commission structure," said HCSC spokesman Greg Thompson.

The risk corridor program was supposed to reimburse insurers with sicker-than-average members. In November, however, HHS said it had only enough money to pay 13 percent of what it owed under the program for 2014.

The result for gold plans is that "the risk adjustment system does not work at all," said Ana Gupte, a health insurance analyst at Leerink Partners. "So it's impossible to make money."

Analysis by Standard and Poor's shows Humana, which is owed $243 million for 2014, as the biggest risk-corridor loser. United, Anthem, Aetna and Cigna, however, aren't in the top 20.

For most of the largest insurers, blaming risk corridors for cutting broker fees "seems more like an excuse than a reason," said Jost.

KHN Senior Correspondent Julie Appleby contributed to this story.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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